The Analyst

The Thesis

GrubHub's outlook remains encouraging, particularly after a partnership with Yum! Brands, Inc. (NYSE: YUM) and the company's ongoing expansion to smaller Tier 2 and Tier 3 cities, Egbert said in the downgrade note. (See the analyst's track record here.)

The Yum! partnership will result in "material" incremental revenue for GrubHub's delivery business by 2019, which in turn will prompt other high-profile chains to feel the need to be featured on GrubHub's platform, the analyst said.

Stifel's 2019 revenue estimates for GrubHub were lifted by 2 percent to $1.18 billion and the EPS estimate was raised from $2.19 to $2.24.

Despite an improved outlook for 2019, the high performance of GrubHub's stock needs to be factored into any rating decision, the analyst said. Shares are trading at a valuation of 31.5x 2019 EV/EBITDA and 1.7x 2010 EV/GFS, both of which are "elevated" relative to historical multiple ranges. While the stock could double in value over a three-to-five year period, the path ahead is unlikely to be linear, Egbert said.

Price Action

Shares of GrubHub were trading lower by 1.6 percent in Monday morning trading.